7 Responses to “Social Security Benefits Indexed to Inflation, Not Wages”

1. David Herr Says:
   May 17th, 2007 at 10:00 am

   This idea is a must, so long as the amount subject to FICA is also indexed to inflation and not wages. SS’s problems come not from providing a small benefit to those who were working poor, but from trying to replace a middle class income. An even better solution is to DROP the amount subject to FICA taxes, to around $40000, and then require all people making above $40000 to save 12.5% of the amount over $40,000 in a Health and Retirement account (think a universal HSA/401k). That way, government taxes and spending get reduced, and people who can afford it save for themselves. This system would ensure that no one who was consistently middle class or better during his or her working life would be a charge on the government.

   The retirement age also has to be increased, since we are living much longer than we were when SS and Medicare were started. To the extent that many people in manual labor jobs can’t work until the higher retirement age, we can be a little lenient with diability money once someone reaches the current retirement age.

2. Keith Says:
   May 17th, 2007 at 10:57 am

   Institute the Fair Tax and people would not have to give 14% of their wages to S.S.

3. mshambaugh Says:
   May 17th, 2007 at 11:45 am

   That’s a great concept. I love the idea of the universal HSA/IRA account.

4. mshambaugh Says:
   May 17th, 2007 at 11:52 am

   Keith, unless the version of the Fair Tax you’re describing somehow eliminates the Social Security program altogether, (which isn’t something I believe I’ve heard advocated along with the Fair Tax) the mechanism by which Social Security is funded (Fair Tax, flat tax, current tax system) isn’t relevant. However SS is funded, the increases in benefits (if any) given to recipients should be based on inflation, rather than wage growth. Don’t get me wrong: I’m a believer in the Fair Tax, but this solution is addressing an issue that’s different from how revenue is raised.

5. Tom Shupper Says:
   May 17th, 2007 at 10:17 pm

   The point would be moot if every wage earner in America had the same retirement plan as Congress. Remember, employers match your FICA and Medicare contributions. There would have to be a phase in period to allow for the SS Trust Fund to actually be operated as intended, instead of allowing Congress to play with it at will. But every participant would have several million dollars by retirement age, whether it was 65 or 70. This would require all Americans to become educated about how pension plans are regulated and how they are managed by “private” outside managers. Again, just like our Congress has available to them and many of us have available in private industry. The government has proven beyond any doubt that it is not capable of looking out for “our” money under any circumstance.

6. Ron Says:
   May 17th, 2007 at 10:22 pm

   Pass the Social Security Preservation Act, H.R. 219–109th Congress (2005) and 110th Congress (2007), to immediately prohibit Congress from raiding the Social Security Trust Fund.

7. Keith Says:
   May 19th, 2007 at 1:52 pm

   20) Social Security/Senior Citizens/Retirement:

   Like all federal spending programs, Social Security will operate exactly as it does today, except that its funds will come from the federal sales tax (the FairTax) which is a more stable funding source. Studies have shown that spending is a more consistent and reliable than incomes. People may lose their jobs but they still consume using borrowed money or savings. On the other hand, when one loses their job, their income is non-existent and can not be taxed.

   Employers will continue to report wages for each employee to the Social Security Administration for the determination of benefits. There will be no changes in who receives benefits or how much they receive. The FairTax neither encourages nor discourages Social Security reform efforts. It does not change Social Security benefits or the structure of the system. It simply replaces the current revenue source (payroll taxes) with a new revenue source (the FairTax revenues). If Social Security is reformed or privatized in a way that reduces the government’s need for revenue, then the FairTax rate can be reduced.

   Most retirement savings were “put away” tax free and have been earning interest tax free. This is the benefit that is given to people who put money into their retirement funds and accounts. The tax code allowed this but it also requires that one pay income tax when they take the money out of the fund. Under the FairTax they will not have to pay income tax on this retirement fund money but they will pay the FairTax as they spend the money.

   As a group, seniors do very well under the FairTax. Low-income seniors are much better off under the FairTax than under the current income tax system. Some believe that people who live exclusively on Social Security pay no taxes. They may not realize it, but because of the hidden and compounded corporate income taxes, employee payroll taxes and compliance costs, they are paying at least 12% more on everything they buy. They also get to choose to pay the FairTax through their lifestyle choices. They can buy a used goods instead of a new ones like cars, houses, clothing etc.

   Seniors, like everyone else, receive a monthly rebate, in advance of purchases, for taxes paid on the cost of basic necessities. If seniors choose to work, they are freed from regressive payroll taxes, the federal income tax on wages, and the compliance burdens associated with each. They pay no more hidden taxes on goods or services, and used goods are tax-free.

   The income tax imposed on Social Security benefits, investment income, pension benefits, IRA’s (Individual Retirement Accounts) and life insurance investments will be repealed. And, of course, the estate tax will be eliminated as well so they can be assured that any money they leave their families will not be taxed. Seniors have higher home ownership rates than other ages and will benefit from the sale of their existing investment homes will not be taxed.

   Also, seniors often have collections (like cars, art, coins) which have appreciated during their lives and would be taxed if profits were made on these items when sold.

   Agree with SS being indexed to inflation. I just wanted to acquaint those unfamiliar with the Fair Tax with, what I
   believe, are great benefits of the Fair Tax.

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